French deal saves steel jobs at ArcelorMittal

The French government has reached an agreement with the steel giant ArcelorMittal that commits the ­company to investing €180 million ($224 million) over five years in one of its three largest French factories and avoids the elimination of about 600 jobs.

The deal, announced by Prime Minister Jean-Marc Ayrault, ends a tense, two-month stand-off that escalated into last week’s threat of a possible nationalisation of the plant.

Mr Ayrault said that, while ArcelorMittal had agreed “unconditionally" to keep all 2700 employees at its site in Florange, in north-eastern France, two idle blast furnaces – at which 600 of those people worked – would remain off line until flagging European steel demand improved. Workers would be redeployed to other areas of the plant, he said, and there would be no layoffs.

“The government has decided against the idea of a temporary nationalisation," Mr Ayrault said.

Nicola Davidson, a spokeswoman for ArcelorMittal, confirmed that an agreement had been reached but declined to discuss the details before a formal announcement on Saturday.

The accord appeared to end the ugly dispute which had pitted the French state, in its traditional role as defender of industry, against a company with mounting debts that was trying to reduce capacity in response to the economic slowdown in Europe.

ArcelorMittal, the world’s largest steel maker, had sought to close the two blast furnaces at the Florange plant permanently but wanted to keep open a part of the facility that processes steel for the car industry.

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With unemployment hovering above 10 per cent, the Socialist government of President Francois Hollande is desperate to avoid more layoffs by name-brand companies.

Several big employers, including PSA Peugeot Citroën, Air France and Sanofi, have announced significant job cuts this year.

But some analysts said that by taking such a strongly interventionist stance to protect steelworkers France risked sending the wrong signal to multinational companies whose investment the economy needs if it is to stave off long-term decline.

ArcelorMittal had given the ­government until midnight ­Friday to find a buyer for the furnaces, offering them for a symbolic single euro, despite scepticism that a buyer would be interested in anything less than the entire factory.

French Industry Minister Arnaud Montebourg had previously insisted that the company agree to sell the whole plant and said two companies were interested, although he declined to identify them.

It was Mr Montebourg who first raised the possibility of a “temporary nationalisation" of the Florange plant in a newspaper interview published last week. In the interview, the minister accused Lakshmi Mittal, the Indian-born billionaire who serves as the company’s chairman and chief executive, of “failing to respect France".

Mr. Mittal, who built ArcelorMittal from the 2006 merger of his Mittal Steel with Arcelor, then the largest European steel maker, had promised at the time to help modernize the European steel sector. But the company said the Florange plant was already scheduled to close under Arcelor, its previous owner.